Woolworths (WOW)

Deutsche Bank has retained its “buy" on
Woolworths
with a 12 month price target of $32 after the company’s quarterly update.

The broker says that while sales growth has been below where it would like, the performance has been reasonable in a difficult environment. Deutsche is expecting increasing momentum as fresh produce prices remain supportive and rebranding deliver benefits.

“The solid growth in customer numbers is indicative of the health of the formats and we expect meaningful operating leverage to stem from an eventual return to food inflation."

Deutsche says that every division posted pleasing quarterly numbers except for petrol, where volumes declined 4.4 per cent on a like for like basis.

The broker is forecasting net profit of $2.36 billion in 2013, rising to $2.52 billion in 2014 and $2.71 billion in 2015. Woolworths delivered net profit of $2.18 billion in 2012.